Asian Journal of Innovation and Policy

Asian Society for Innovation and Policy (아시아기술혁신학회)
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The Role of the Spatial Externalities of Irrigation on the Ricardian Model of Climate Change: Application to the Southwestern U.S. Counties

  • Bae, Jinwon (Center for Balanced National Development, Korea Institute for Industrial Economics & Trade) ;
  • Dall'erba, Sandy (Dept. of Agricultural and Consumer Economics, Center for Climate, Regional, Environmental and Trade Economics, University of Illinois at Urbana-Champaign.)
  • Received : 2021.08.23
  • Accepted : 2021.09.02
  • Published : 2021.08.31
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Abstract

In spite of the increasing popularity of the Ricardian model for the study of the impact of climate change on agriculture, there has been few attempts to examine the role of interregional spillovers in this framework and all of them rely on geographical proximity-based weighting schemes. We remedy to this gap by focusing on the spatial externalities of surface water flow used for irrigation purposes and demonstrate that farmland value, the usual dependent variable used in the Ricardian framework, is a function of the climate variables experienced locally and in the upstream locations. This novel approach is tested empirically on a spatial panel model estimated across the counties of the Southwest USA over 1997-2012. This region is one of the driest in the country, hence its agriculture relies heavily on irrigated surface water. The results highlight how the weather conditions in upstream counties significantly affect downstream agriculture, thus the actual impact of climate change on agriculture and subsequent adaptation policies cannot overlook the streamflow network anymore.

Keywords

Acknowledgement

The authors would like to thank Xinyue He for providing research assistance.

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